Wednesday, August 25, 2010

I couldn't let this article by Ed Morrissey at Hot Air go unchallenged... w/ Update

While Mr. Morrissey is correct that used car prices have risen as a result of the Cash for Clunkers program, there is one thing he says in his article  "Used car prices skyrocket a year after Cash for Clunkers"
  I can safely say from the standpoint of being a former car salesman that is just ridiculous and, well, a bit elitist sounding.

The following statement at the end of his article states  (emphasis mine)

As predicted last year, the people most hurt by the price increases are those who can least afford them.  The used-car market usually attracts people who need transportation on a budget, who cannot afford to buy new.   By destroying a quarter’s worth of trade-ins in three weeks and permanently taking them off the market, the Obama administration has forced an artificial inflation by supply restriction.  Moreover, they did so by subsidizing new-car sales that would have occurred anyway, eating up three billion dollars in taxpayer money.
In other words, the White House spent $3 billion to make used cars more expensive for working-class families.  Nice work.
Buying a new car, even if you can afford to do so, is not a very wise thing to do.  Most people that are millionaires rarely buy a new car.  Once that shiny new car goes "over the curb" from the lot, it has depreciated approximately 20%.  The rate of depreciation slows down for the next few years, and starts to drop like a rock at about 5 years old.   The smarter option is to buy a car that is perhaps one year old with low miles (30K or under), and trade it in after about 3 years.

Ed's statement that only working-class people buy used cars is disingenuous and a bit smarmy.  Before I sold cars for a living, I always bought new and made payments.  Now I always buy used and pay cash.  And I would hardly call my auto "transportation on a budget", even though the most I've ever paid for a car is 10K.    When I see young families driving around in a 35K or above SUV, you can bet your bottom dollar they have a whopping big car payment.  I don't call that smart at all.

Update:

From Gateway Pundit guest contributer Warner Todd Huston:
Cash For Clunkers Hurting Lower Class Car Buyers

Good grief!  Now people that buy used cars are "lower class." 


A lot of wisdom in this clip from the classic movie "Used Cars"

3 comments:

Reaganite Independent said...

I sold cars for over 8 yrs, Adrienne

The first thing you learn there is to buy a super clean trade that comes in cheap... and put the rest of your money in the bank.

I bought a new Mercedes anyway though... and when I figured out how much it cost me, I never bought a new car again, for most people avoiding that could completely change their whole budget and lifestyle for the better.

I LOVE cars of all sorts... but my favorites where the used ones with character... all you do is worry when you've got a new one

Anonymous said...

I refuse to buy new and have a car note ever again. I'd rather drive an older car than have the note.

republicanmother said...

Guess Ed doesn't listen to Dave Ramsey, who always advises buying a used car. I've never had a car loan I couldn't pay off in about a year and it was never much past $100 month. Why would you pay more just to get up and down the road?